HOAs and Community Organizations
Homeowners associations and community organizations manage shared funds, reserves, and long-term obligations on behalf of members.
As associations grow in size, take on major projects, or seek financing, expectations around independent financial reporting and governance tend to increase.
If you’ve been asked for “audited financials,” or you’re unsure whether you need an audit, a review, or another form of independent financial reporting, this page explains what typically drives those requests and what HOAs and community organizations should expect.
Different Types of Associations
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Condominium Associations
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Planned Unit Developments (PUDs)
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Homeowners Associations (HOAs)
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Cooperative Housing Associations
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Special Districts & Community Organizations
Quick Audit Readiness Check (For Boards & Property Managers)
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Are member assessments billed and collected consistently?
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Are reserve balances reconciled to bank accounts and reserve studies?
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Are capital expenditures documented and approved?
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Are contracts with management companies and vendors documented?
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Do we understand which systems generate our financial reports?
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Are access rights to accounting and payment systems reviewed periodically?
Audit vs Review vs Compilation — Plain English
Compilation
Financial statements are prepared from management’s records. No assurance is provided, and no independent verification is performed.
Review
A review provides limited assurance through analytical procedures and inquiries. It does not involve detailed testing of transactions or balances. Reviews may be sufficient for smaller associations but often do not meet lender or statutory requirements.
Audit
An audit provides the highest level of assurance and involves independent verification of selected balances, transactions, and controls. Audits are commonly required for larger associations, financing arrangements, or where governing documents mandate independent assurance.
The appropriate level of assurance depends on statutory requirements, governing documents, lender expectations, and the size and complexity of the association.
Not Sure What Level of Independent Reporting Is Appropriate?
Boards and property managers are often unsure what level of reporting is expected by members, lenders, or regulators.
A short audit readiness discussion can help clarify what level of assurance is typically expected in situations similar to yours and what preparation would be most useful before committing to a formal engagement.
Jedidiah CPA works with member-based and community organizations navigating governance, capital planning, and stewardship-driven reporting environments. Our experience includes supporting boards and management teams as they prepare for audit and review requirements tied to financing, governance, and long-term capital planning.
For those who would like additional background, you can review the lead partner’s professional experience and selected client feedback:
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Do HOAs and Property Associations Always Need an Audit?
Not all HOAs or community associations are legally required to have audits. In practice, audits or reviews are often requested due to:
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State or local statutory requirements
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Lender or financing requirements (e.g., association loans or special assessments)
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Governing document or bylaw requirements
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Board or member expectations for independent oversight
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Preparation for major capital projects
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Common Situations That Trigger Audit Requirements
Audit or review requirements commonly arise when associations:
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Undertake major capital projects or special assessments
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Seek bank financing or lines of credit
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Experience board transitions or management changes
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Respond to member concerns about transparency or stewardship
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Prepare for regulatory reviews or compliance inquiries
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Practical Scenarios Commonly Seen
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The association is planning a major roof, façade, or infrastructure project and the lender requires audited financial statements.
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New board members have been elected and are requesting an independent review of the association’s financial position.
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Reserve balances have grown significantly and members are asking for greater transparency.
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The association has experienced management turnover, and the board wants independent confirmation that financial records and reserve balances are complete and accurate.
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Key Areas Commonly Examined in Audits and Reviews
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Assessment revenue and receivable balances
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Reserve funds and reserve study alignment
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Existence and safeguarding of cash balances
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Expenditures for capital projects and maintenance
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Related-party transactions with management companies or vendors
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Internal controls over collections, disbursements, and approvals
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Compliance with governing documents and statutory requirements
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A Note on Fraud Risk and Oversight in Associations
Associations often operate with small administrative teams, rotating board members, and reliance on third-party management companies. These structures, while practical, can create environments where segregation of duties is limited and oversight depends heavily on trust.
Most associations operate with integrity. However, where financial processes are informal, documentation is limited, or responsibilities are concentrated in a small number of individuals, the risk of error or misuse of funds can increase.
An audit or independent review is not designed to assume wrongdoing, but it can serve as an important governance tool by:
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Providing independent verification of balances and transactions
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Highlighting gaps in oversight or controls
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Reinforcing accountability to members
While audits are not designed to detect all instances of fraud, independent reporting can strengthen governance and help surface control weaknesses that may otherwise go unnoticed.
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What Can Go Wrong When Financial Reporting Is Not Ready
- Delays in financing or project approvals
- Member distrust or disputes
- Increased scrutiny from regulators or oversight bodies
- Higher audit costs due to late adjustments or missing documentation
- Unresolved concerns about stewardship or misuse of funds
- Erosion of confidence in board governance
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What the Process Typically Looks Like
1. Planning and scoping – understanding the association’s structure, governing documents, and financial arrangements
2. Risk assessment – identifying areas of higher risk, including reserves, assessments, vendor arrangements, and oversight controls
3. Fieldwork – testing selected balances, transactions, and system-generated reports
4. Discussion of observations – communicating matters identified during the engagement and governance implications
5. Reporting – issuance of audit or review reports for boards, members, and lenders
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The Role of Technology and Data in HOA Audits
Associations and property managers rely on accounting systems, property management software, online payment platforms, and reserve tracking tools.
While a financial statement audit is not a cybersecurity or IT audit, auditors consider whether:
- System-generated reports used for member assessments and reserves are reliable
- Access to accounting and payment systems is appropriately restricted and reviewed
- Third-party management platforms are understood and appropriately overseen
Weaknesses in these areas can increase audit risk and member concerns.
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Not Seeing Your Exact Situation Here?
Many organizations do not fit neatly into a single category. Some operate across sectors, use emerging business models, or combine elements of different operating models.
A short audit readiness discussion can help determine what level of independent reporting may be appropriate based on your structure, funding sources, and stakeholder expectations — even if your organization does not match any single example on this page.
